The future of Heath Care in Emerging Markets

Guy Ellena
Rio de Janeiro, November 2009
Atos KPMG Consulting 2003

Agenda

Introduction

Trends : Demand, Supply and Cost

Opportunities

IFC & Health Care in Emerging Markets

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First : Population is Growing

6.7 billion people in the world

Adding about 80 million more per year
An extra Turkey or Germany each year!
Most of this growth is in emerging markets

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Second, Population is aging

Close to 1 million more people in the world

age 65+ EVERY MONTH!
Top 3 countries adding people 65+ are:
India, China and US
Many developing countries will get old
before they get rich

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Populations are aging

Population Over 65 Years By Region (% of total)
18%
16%
14%
12%
10%
8%
6%
4%

2%
0%
EUROPE & CENTRAL ASIA

EAST ASIA & PACIFIC

LATIN AMERICA & THE

CARIBBEAN

2005

MIDDLE EAST & NORTH

AFRICA

2025

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2045

SOUTH ASIA

SUB-SAHARAN AFRICA

65+ popn has much higher health needs

Number of visits per year per capita by age of patients in USA
All ages

3.4

Less than 6 years

4.2

6-17 years

1.9

18-24 years

1.9

25-44 years

Population ageing will have

significant impact on healthcare
provision and financing
2.7

45-64 years

4.1

65-74 years

6.7

75+ years

7.8

Source National Ambulatory Medical Care Survey (NAMCS)

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And hospital use increases with age

Rate per 1,000 population

4000
Days of Care

3500
3000
2500
2000
1500
1000

Hospital Discharges

500
0
15-24
yrs

25-34
yrs

35-44
yrs

45-54
yrs
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55-64
yrs

65-74
yrs

75-84
yrs

85+ yrs

Third, Disease Mix is Changing

Infectious disease
Fewer people die young from infections
They now live long enough to get diseases of older people
And they have more money: afford to eat more, do less
physical work, afford more alcohol and tobacco

Result into :
Cancer, heart disease and other chronic conditions

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Western Diseases increasingly becoming Eastern

Cancer example: Disease map is shifting from West to
East
Cancer diagnoses (millions)

1.6 MM

Majority of cancer
diagnosis now
outside of Europe
and N America

2.8 MM
4.9 MM
0.6 MM

0.8 MM
0.1 MM

Source: Cancer Research UK

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Fourth: Cost of Diagnosis & Treatment increase fast

Infectious disease diagnosis & treatment:
Short duration
Relatively simple, cheap technology

By contrast, diagnosis & treament of cancer, heart disease,

diabetes etc.
Long duration
Complex, expensive technology

RESULT:
Increased cost

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Result: Health Expenditures are rising

US $ billion
350
280
210
140
70
0
1989

1994

1999

2004

2009

LAC

Developing Europe

Africa/Mideast*

Developing Asia/Pacific
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And most health expenditure are private

All countries

57.3

South Asia

80.2

Sub-Saharan Africa

60.6

East Asia and Pacific

60.3

Latin America and Caribbean

54.2

Middle East and North Africa

50.6

Europe and Central Asia

28.1

High income countries

35.1

10

20

30

40

Percentage of total health expenditures

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50

60

70

80

90

From the supply side

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First, the Private Sector grows fast

Demand is growing
Public sector health spending is not growing
fast enough to meet demand in emerging
markets
RESULT:
Private sector growing faster than public
sector to meet the gap between demand and
supply
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Second, (private) hospitals are getting busierand

smaller.!
More conditions are being treated outside of
hospitals on an ambulatory basis
Average length of hospital stay is getting shorter

Increasing use of day surgery:

US leading this trend now >77% or procedures
are outpatient or day surgery

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Third, large Health Care Firms are emerging; and

Health Care Organizations are getting international

Apollo
Hospitals

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Fourth, International Standards are getting

established

International Healthcare Accreditation

Organisations

Joint Commission International

Health Quality Service
Canadian Council of Health Services
Accreditation
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In summary
Demand and cost will increase due to demographic and disease mix
changes
The supply of health care will need to rise both quantitatively and
qualitatively to meet this increased demand
Private sector will play a growing role to fill demand-supply gap
More private provision directly to patients insurance or out-ofpocket funding
More Public-Private Partnerships to build and operate healthcare
infrastructure
Increasing separation of payment and provision
More public payment for private provision

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Opportunities

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What type of opportunities?

Buy into and consolidate/expand small hospital groups
Operation & management contracts

IFC often sees hospital projects with doctors, sponsors, investors,

but lacking experienced hospital management

Hospital Management skills

There is a marked shortage of management expertise in EM private

hospitals
Expanding training program for hospital managers. Currently, very
underserved market

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Geographically
Asia:
India the most significant emerging market, strong growth
most healthcare is privately financed; mostly out-of-pocket, insurance
still very small, though growing
There is opportunity to look at second-tier operators also, who need
partners

IFC has also invested in Hospitals in Thailand, Philippines and Sri Lanka
Difficulty to find operators with scale and appetite for expansion
Know-how to build up chain and gain economies of scale could be a
great asset to local partners

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Geographically
Middle East & North Africa:

There are growing markets in Egypt, Tunisia and others in

addition to the higher-income GCC states

Egypt has a large population, but no hospital operators of

substantial scale

IFC has invested in Egypt, Yemen and Ethiopia.

Tunisia has private hospital projects seeking technical

partners

Fragmented; consolidation opportunities exist

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Geographically
Latin America:

Growing private markets, still very fragmented

Mexico growing private market, hospital chains (except

one) are small
Peru growing market, fragmented, lack of professional
hospital management, government doing more PPPs in
health
Brazil very big private market, ripe for consolidation, a
natural fit for investments but regulation prohibits foreign
ownership of hospitals.
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Geographically
Central & Eastern Europe:

slow population growth

Growing private markets but still very fragmented;

E.g. IFC has a client in Romania who was looking

for technical partner; could not find suitable partners
due to lack of emerging market hospital expertise

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Geographically
Sub-Saharan Africa:

Multiple projects seen where the biggest weakness is lack of hospital

management experience, where clients have asked for hospital
management companies to partner with.

Active interest expressed in partnering with more developed hospital

companies

IFC seeing African healthcare providers partnering with companies in

areas such as pathology labs, imaging, etc

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IFC in the health sector

Private sector arm of the World Bank

Invests in private sector projects in
developing countries
Worlds largest multilateral investor in
the private health sector

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IFC Health Portfolio at a glance

84 private health projects in 33 countries since 2001
close to US$1 billion committed
US$ 2,550+ mm of total project value
Current portfolio of 47 projects and $615 million
Active Portfolio by Product*

Active Portfolio by Country*

* Data as of September 2008

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